Weak manufacturing data pulls the pound lower

The pound fell back from earlier highs in mid morning deals after the pace of growth in Britain's manufacturing data slowed further in August.

The pound had opened higher against the dollar but fell sharply after the disappointing data before recovering some poise later, up just 0.06% against the dollar at $1.53 and down 0.55% against the euro at €1.20.

The Markit/CIPS UK Manufacturing Purchasing manufacturer's industry – based on new orders, production, employment, supplier performance and stocks of purchases – fell to 54.3, from 56.9 in July, its lowest level since last November.

Economists had expected the number to tick lower to 57 from the 57.3 in July.

Chris Williamson, chief economist at Markit, said 'the manufacturing sector’s contribution to GDP will have moderated in Q3, with quarterly growth slowing from the buoyant 1.6% pace seen in Q2 to perhaps less than 1% for Q3 as a whole.'

He said the outlook for the final months of the year had 'darkened.'

Jonathan Loynes, chief European economist at Capital Economics, said while the impressive recovery seen over the last year or so is losing momentum it is still growing and is still 'some way from double-dip territory'.

The FTSE 100 fared better, up 56.05 points, or 1%, at 5281.9, adding to late gains yesterday as upbeat news from China this morning offset mixed news from the US overnight.

The DJIA closed just 4.99 points higher at 10014.7 as a mixed message from the US rate-setting Federal Open Market committee overshadowed better than expected consumer confidence data earlier. Futures suggest the US blue chip index will rise 97 points in opening deals.

In Asia, the Nikkei rebounded from sharp losses Tuesday to add 102.9 points to 8927 after August Chinese PMI reading rose to 51.7 from 51.2 in July, slightly ahead of the market consensus of 51.5. Market players said that suggests recent fears of a slowdown in the Asian economic powerhouse have been overdone.

In UK corporate news, TUI Travel led the risers, up 10.1p at 211.4p after reports German parent TUI is considering whether to buy up the shares it does not already own.

African Barrick Gold was lifted 11.5p to 618.5p by an upbeat note from Collins Stewart while Intercontinental Hotels got a boost as Morgan Stanley said the 20% fall in its shares over recent weeks is unjustified. The broker lifted its rating to 'overweight' from 'neutral'. Shares rose 26p to £10.08.

But shares in luxury goods group Burberry was one of just a handful of fallers, down 4p at 846.5p after HSBC downgraded its stance to 'neutral' from 'overweight'.

Tullow Oil shares fell 4p to £12.14 amid growing concern that the dispute between Heritage Oil and the Ugandan government over unpaid capital gains tax may delay Tullow's purchase of Heritage assets for some time to come. Arbuthnot downgraded its view to 'sell'.